2016 IPO Prospects: Palantir Wants to Stay Private

A MarketsandMarkets report estimates the advanced analytics market to be worth $7.04 billion in 2014. The  market is expected to grow 33% annually to $29.53 billion by the year 2019. The advanced analytics market includes analysis of all kinds of data using sophisticated quantitative methods such as statistics, predictive and descriptive data mining, visualization, and optimization for forecasting.

Palantir’s Financials

Peter Thiel, Nathan Gettings, and Joe Lonsdale founded Palantir in 2004 to create software solutions that were able to integrate, visualize, and analyze data with a focus on ensuring security. What began as a government supported initiative to help make the world a safer place, was soon adopted by commercial organizations wishing to secure their own assets. Palantir’s software was built to be used by the intelligence, defense, law enforcement, and financial communities for critical tasks such as tracking terrorists, human trafficking, financial crimes, and disease outbreaks. Today, its non-government customers include names like chocolatier Hershey and banks such as Morgan Stanley and JP Morgan Chase. These organizations are using Palantir’s technology for services like fraud detection.

Palantir earns revenues through the sale of its software. It is privately held and does not disclose any of its financials. It has revealed that bookings are growing rapidly. Customer bookings grew to $1.1 billion in 2014 from a modest $30 million in 2009 – translating to an annual growth rate of 107%.

Palantir has raised $2.4 billion in funding so far with investments from 137 Ventures, ARTIS Ventures, Benjamin Ling, Founders Fund, Glynn Capital Management, In-Q-Tel, IT Ventures, Jeremy Stoppleman, Keith Rabois, Kortschak Investments, Mithril Capital Management, Reed Elsevier Ventures, and Ulu Ventures. Its last funding round was held in December 2015 when it raised $880 million at a valuation of $20 billion. Valuation has skyrocketed from the $6 billion that it was pegged at in September 2013. At $20 billion valuation, Palantir is the fourth largest venture backed company in the world.

Palantir’s Concerns

Palantir’s secrecy is not just restricted to its financials. The company and its executives rarely give interviews or publish press releases about its plans. But that has not stopped other critics from lashing out about Palantir. Palantir has a tight relationship with the federal agencies. Its data has helped in the prosecution of Bernie Madoff and even in finding Osama Bin Laden. But privacy and civil liberties advocates are not happy about that. In its quest to make the world secure, Palantir is building a system where everyone’s data is open to scrutiny–a belief not supported by these groups.

Additionally, as Palantir makes more inroads into the private sector, it will have to face stiffer competition. There are many data analysis and visualization tools available for organizations to use. IBM, RSA Data Security, and Splunk are a few who are offering tools that are similar to Palantir’s and, apparently, at a lower cost.

It is difficult to comment on Palantir’s growth and valuation without knowing more details about its financials. Investors at Palantir are hoping that the company will list soon so that they can cash out their investments. But Palantir does not appear to be in a rush. According to founder and investor Peter Thiel,

“I’m committed to Palantir for the long term, and I’ve advised the company to remain private for as long as it can”.

For now, it can.

This segment is a part in the series : 2016 IPO Prospects